In a nutshell: Betterment is an industry leader as a simple, low-cost, easy-to-use robo-advisor.
With just 0.25% in management fees and automated tax-loss harvesting, Betterment makes it easy to put your portfolio on autopilot.
In a nutshell: Betterment is an industry leader as a low-cost, easy-to-use robo-advisor.
With just 0.25% in management fees and automated tax-loss harvesting, Betterment makes it easy to put your portfolio on autopilot.
Disclosure: This Betterment review may contain affiliate links. This means we earn a small commission (at no additional cost to you) if you purchase a product through our links.
Betterment is a leader as a simple, low-cost robo-advisor. With low management fees and tax-loss harvesting, it makes automation easy.
In this Betterment review, we'll take a deep dive into all of Betterment's features and how they stack up.
Robo-advisors like Betterment are changing the world of investing. That's because they create personalized advice for investors using a series of algorithms.
Above all, Betterment creates an investment strategy and builds an investment portfolio that works.
Click for Betterment pricing and details.
Whether you are planning for college, getting married, or want to create tax efficient retirement savings, robo-advisors make it easy.
Plus, they just make it far less stressful.
Let's dive right in and take a look at everything Betterment has to offer.
What is Betterment?
0.25% (Digital), 0.40% (Premium)
IRA, Brokerage, Trust, Cash, Checking
Betterment is at the forefront in the world of robo-advisors. Investors can use the platform to get advice on many different investment opportunities, including:
- Mutual funds
- Bond funds
- Exchange traded funds
Also, Betterment uses fractional shares.
What are fractional shares, you ask? Well, they help users fully leverage their money.
For example, you may want to buy a share of Google stock. And then you look at the share price.
Don't worry: fractional shares allow you to buy tiny chunks of a share. That means you won't have to wait until you can buy full shares.
Betterment is not just a bunch of algorithms. On the contrary: Betterment has great reputation compared to competitors.
It has an excellent customer service record, and users can seek advice from a certified financial planner (CFP).
Betterment offers unlimited access to this kind of advice through its Premium plan.
A Betterment brokerage account is perfect for new investors. Especially those who don’t want to spend many hours learning about investing.
As a result, Betterment remains the most well-known robo-advisor in the market.
It’s also a great place for more experienced investors to park their money and watch it grow. That's because it has tax advantages.
Now is a good time to sign up with Betterment. You could get up to 12 months free (no management fees!).
Click here to see promotion details.
New Betterment enrollees currently enjoy double payouts for accounts with $100,000 or more. Additionally, customers with taxable accounts of $100,000 get a free Canary home security device.
Betterment enrolls new investors in an automated portfolio of stocks and bonds. Then, it charges a flat 0.25% fee for its Digital Plan. For the Premium plan, you'll pay a 0.40% fee.
Betterment’s website shows you how much you need to contribute for retirement.
You can also see how your account will grow over the years in all kinds of market environments.
With automated deposits, you won’t have to manage a thing.
Betterment’s tax-loss harvesting (known as TLH+), automated diversification, Tax-Coordinated Portfolio, and reinvestment of dividends will make your money grow.
Not only that, but it'll save you money on taxes, too.
Betterment is simple, effective investing for the Internet generation.
Our enthusiasm about Betterment is real. Read on to learn why.
Betterment Account Types
Betterment has a wide variety of account types:
- Individual taxable account
- Joint taxable account
- Traditional, Roth, and SEP IRA
- Inherited IRA
- Trust account
- High-yield savings account
- Checking account
Betterment also supports 401k rollovers. Hence, it allows you to roll an old 401k into a Betterment IRA.
You also have the option to link external accounts to help track your financial goals.
How Does Betterment Stack Up?
The Betterment Story
Betterment was founded in 2008 by Jon Stein, who still serves as CEO. The company launched in 2010 after a big debut at TechCrunch Disrupt NYC.
After that, Betterment quickly scored $3 million in funding and has enjoyed steady growth ever since.
The press has been kind to Betterment. For example, you’ve likely seen glowing reviews in the Wall Street Journal, Forbes, and CNN.
Betterment’s portfolio results have proved that this is more than hype. Indeed, Betterment now has more than 150,000 users and manages more than $4 billion.
Almost a decade from its inception, Betterment is here to stay. In fact, it's now a major player in the investment world.
The result? It's bringing a new generation into the intelligent stock market investing.
When using Betterment, the first thing investors are asked about is their goals. For example, building a retirement fund or creating an emergency fund.
Betterment reviews your goals and considers what your holdings should be. In addition, it determines the appropriate level of risk.
Finally, it provides dedicated advice based on the financial goals of the investor.
Let's take a closer look at Betterment's methods.
Betterment Investment Performance
Independent investment managers usually charge more than 1% annually. Nevertheless, they usually fail to beat the market.
Betterment has “beaten the market” 88% of the time since its inception. It does this with a portfolio of US and international stocks compiled by experts.
Like many robo-advisors, it uses Modern Portfolio Theory (MPT) to maximize performance while minimizing risk.
As a result, Betterment’s portfolio grew a massive 101.3% between 2009 and 2014.
And in 2013, the platform boasted 11% growth with a 70% stock allocation.
New User Promotions
Betterment’s new user promo waives the service free for up to 12 months for new accounts. Plus, there are extra perks for those who refer people.
Seamless Platform Performance
Betterment platform performance couldn’t be better and it works well on just about any platform.
For instance, whether you have a desktop, laptop, or smartphone, Betterment is compatible.
It’s a 21st century platform and it just works.
Better Investment Philosophy
Betterment uses every possible method to save their users money and add value to the platform.
For example, it includes free standard offerings like TLH+, Smart Deposit Automation, and a Tax-Coordinated portfolio.
And these features are all built on low-cost, high-performance ETFs.
Betterment Investment Options
It’s easy to create custom asset allocations and personalized investment goals. As such, you can also create a variety of account types, including taxable and non-taxable accounts.
Nearly every aspect of Betterment is favorable. Simply put, it's an investment model that offers the best results to the most people.
FAQ and TL/DR
It's time to take a look at what Betterment has to offer in more detail.
Too busy to read the full review? Here are some answers to your deepest burning questions about Betterment.
Betterment recently changed their pricing policy. Consequently, all users now pay 0.25%, regardless of account balance for the standard Digital plan.
This is a discount for low-net worth users. These users used to pay 0.35%.
However, it's also a price increase for high-net worth users. They used to pay 0.15%.
There is no account minimum required for the Betterment Digital plan.
However, there is now a Premium plan with a 0.40% fee. This plan includes personalized asset advice and management.
Investors can get unlimited access to investment advisors by phone and email with this service. It's worth noting that users of the premium service are required to have an account balance of $100,000.
There is an impressive range of low fees all round for all Betterment services.
Betterment vs. Vanguard
Vanguard can sell you the same portfolio as Betterment for a little less money in annual fees. But only if you are willing to do a lot more work on your own.
In most cases, the cost difference is very slight.
At Vanguard, you’ll also have to perform all your own tax-loss harvesting, tax-coordinated portfolio service, re-allocation, re-investment, etc.
These perks more than cover the cost of your Betterment fees.
Betterment vs. Robinhood
Betterment and Robinhood both have a lot to offer, but the target market is quite different.
Betterment is great for those who want a hands-off approach to investing. Once you determine your stock/bond, all you have to do is add money to your portfolio.
The platform does the rest. Since it has automatic rebalancing and tax-loss harvesting, it really is a set-it-and-forget-it solution.
Of course, you do pay a fee for that convenience, which is something to keep in mind.
Robinhood is really quite different. This app is a commission-free trading platform that allows you to trade a variety of different assets.
Specifically, you can use Robinhood to trade stocks, bonds, ETFs, and options. Even cryptocurrency trading is possible with this app.
And there are no commissions for any of these trades, nor is there a membership fee.
What you don't get with Robinhood is any sort of dynamic rebalancing or tax-loss harvesting. It's more of a DIY solution.
Nevertheless, the lack of commissions make Robinhood great for more active traders. Day traders would find this app useful, for sure.
Can I Trust Betterment?
Betterment is not a bank, so it's not FDIC insured. Nevertheless, it is regulated and its users are insured by the SIPC.
In addition, it has great scam/fraud protection and encryption.
See their BBB rating here.
Can I Use Betterment in Canada? Can I Use Betterment in Australia?
Not at this time, but they’re working on making it available. You may see that coming in the near future.
What Does the Betterment Portfolio Look Like?
Betterment works to give the user a strong selection of individual stocks and bonds. As a result, users see great historical performance and affordability inan investment account.
The user selects their own stock/bond allocation. Bonds generally offer slow growth, reliable dividends, and low risk of value loss.
On the other hand, stocks are more volatile, but can experience higher growth.
Betterment’s current portfolio offerings are as follows:
Vanguard U.S. Total Stock Market (VTI)
iShares Short-Term Treasury Bond Index (SHV)
Vanguard US Large-Cap Value Index (VTV)
iShares Core U.S. Aggregate Bond
Vanguard US Mid-Cap Value Index (VOE)
Vanguard Short-Term Inflation-Protected Securities (VTIP)
Vanguard US Small-Cap Value Index (VBR)
Vanguard US Total Bond Market Index (BNDX)
Vanguard FTSE Developed Market Index (VEA)
iShares National AMT-Free Muni Bond Index (MUB)
Vanguard FTSE Emerging Index (VWO)
iShares Corporate Bond Index (LQD)
iShares J.P. Morgan USD Emerging Markets Bond (EMB)
*Note: Betterment stocks slightly favor value and small-cap stocks, which historically outperform the broad market. You wanted a detailed Betterment review. We tried to leave no stone unturned.
Betterment has a number of unique features that set it apart from the competition. All of these features help ensure your portfolio will be safe, secure, and properly managed.
Custom Asset Allocation
This customization is based on the account type an investor has and what their risk levels look like.
This feature is especially useful for investors with irregular income. With it, you can choose to invest automatically whenever your bank account balance reaches a certain amount.
Likewise, you can limit the amount of the investment. One of the best things about SmartDeposit is that it is easy to set up.
This feature enables the allocation of assets based on the tax efficiency of tax-deferred and taxable accounts.
Passwords to Control Security
Investors can allow services such as Personal Capital and Mint to see a read only version of their information without compromising the security of their account.
Socially Responsible Investing
The socially responsible investing feature at Betterment supports ETFs that have a positive effect on the world.
It does all that while being fully diversified and low-cost. Specifically, it replaces the following asset classes with SRI alternatives:
- U.S. stocks – large cap
- Emerging market stocks
- Developed market stocks
Betterment has offered socially-responsible investing since 2017. But, in 2020, it expanded its socially-responsible products.
The original portfolio became known as the Broad Impact portfolio.
It then added two new socially-responsible portfolios: Social Impact and Climate Impact. In doing so, it allows investors to hone in on the issues they value most.
Climate Impact Portfolio
The Climate Impact portfolio focuses on mitigating climate change. In particular, it invests in three areas:
- The companies with the lowest carbon footprints in each sector
- Funds that actively exclude companies with fossil fuel reserves
- "Green bonds" which invest in alternative energy, pollution control, and climate adaptation
Specifically, the Climate Impact portfolio invests half of its assets in the iShares MSCI ACWI Low Carbon Target ETF (CRBN). It's worth noting that low carbon does not mean carbon-free.
CRBN scores a C grade on Fossil Free Funds with almost $23 million invested in fossil fuels.
That said, the fund has almost $485M in assets. That's less than half a percent of its equity in fossil fuels.
And that's better than other popular funds such as VTSAX. This fund has about 6% of its equity in fossil fuels.
Still, I would have liked to see a slightly better score in terms of climate impact for this fund.
The rest of the Climate Impact portfolio is invested in SPYX, EFAX, and EEMX. SPYX also scores a C on Fossil Free Funds, but the other two score slightly better with a B grade.
Social Impact Portfolio
The Social Impact portfolio invests in US companies that value diversity. This includes funds such as the NACP ETF and the SHE ETF.
These two funds give exposure to organizations that value ethnic and racial diversity and gender diversity, respectively.
BlackRock Target Income Portfolio
This is a relatively new portfolio option at Betterment. It's an ideal solution for anyone who is looking for low risk investments.
The entire portfolio is centered on bonds that provide a low level of risk.
Goldman Sachs Smart Beta Portfolio
This is another portfolio that is a recent addition to Betterment. In order to compete with the likes of Schwab, investors who use Betterment can benefit from the implementation of Smart Beta. This helps improve returns.
Mobile App Access to a Financial Expert
Anyone who signs up for a Betterment account can send a message to a financial expert using the Betterment app. It's an excellent way of getting an answer to any pertinent questions.
Giving to Charity
Customers of Betterment can donate an amount of shares of their choosing to certain charities. This benefits the charities as well as helping investors to avoid capital gains tax on the shares which they donate.
Anyone who has $100,000 or more in their Betterment account can take advantage of this opportunity. It allows you to adjust the asset class weights within your portfolio.
Betterment Financial Advice Packages
One of the most recent offerings from Betterment provides investors with the opportunity to get help from a financial advisor.
Now, you can take advantage of individual advice packages.
That includes advice from a licensed financial expert or certified financial planner for specific life events.
For $199, you can book a 45-minute Getting Started call with financial advisor. Then, if you want a call that is more tailored to your needs, you can book one of four 60-minute calls for $299:
- Financial Checkup
- College Planning
- Marriage Planning
- Retirement Planning
Betterment Cash Reserve and Checking
This new provision from Betterment has replaced the previous Smart Saver option. The new account is a cash management Betterment calls the Cash Reserve account.
This new account has an interest rate or APY of up to 0.40%. Additionally, this savings account has no fees.
Anyone who chooses to use this facility gets access to Betterment checking accounts, savings accounts and Visa debit cards.
The checking account also has some nice features. For example, Betterment will reimburse all ATM fees. That means both foreign and domestic.
It also eliminated overdraft fees, transaction fees, and minimum balances.
What's left? A no-nonsense checking account.
Betterment IRA Review, and Other Account Types
Because so many users start Betterment IRAs, this account type is worth a little extra attention.
An individual retirement account (IRA) helps those who are using Betterment for retirement planning.
Betterment users can utilize Retireguide to carry out a comprehensive retirement calculation in order to choose the right retirement account for them.
They can choose between several different IRA accounts including a Traditional IRA, a Roth IRA, and a SEP IRA, depending on tax deference preferences and retirement goals.
Betterment’s visualization tools make it easy to see the advantages of each tax model.
In addition, users can start Taxable Accounts, 401k, Trust Accounts, and 529 Plans.
Reviews of Betterment's Departments, Products, and Offerings
There are a lot of aspects to Betterment’s service. Here’s what we’ve found after more than a year of use.
Betterment’s TCP adds a lot of value to the already great service. A Betterment-controlled Tax-Coordinated Portfolio is a way to automatically put expensive holdings into tax-protected accounts and cheap holdings into taxable accounts.
Of course, this only works for people who have multiple accounts with Betterment. But as you use the service longer and longer, you’ll likely do just that.
Let’s say you have one taxable account, one Roth IRA, and one Traditional IRA.
Betterment’s algorithms automatically swap out all the assets contained in these accounts until they are in an orientation that costs you the least amount of money possible. Betterment estimates annual savings of 0.48%, or 15% over 30 years.
Betterment is responsive and detailed in its emails. Betterment chat is now available, and representatives are available by phone 7 days a week until mid-late evening EST.
There is even a special line for 401(k) customers, Plus, and Premium customers.
Betterment offers up to 12 months of free service for new accounts with $500,000 and above.
$10,000 new accounts get 1 month of free service, $25,000-$49,999 2 months, $50,000-$99,999 3 months, $100,000-$249,999 6 months, and $250,000-$499,999 9 months.
Tax-Loss Harvesting & Rebalancing
Betterment offers free tax-loss harvesting and re-allocation/portfolio balancing. Also, Betterment will automatically rebalance your portfolio so you don't have to worry about maintaining it.
Both of these could be accomplished by users through traditional platforms, but the time and costs involved would quickly eat up the savings incurred.
How Do I Sign Up?
At this point, you might be ready to sign up for Betterment. Good news – it’s really easy.
New users input all the usual information, then start asking some questions about their investment goals (risk tolerance, time horizon, etc.).
You’ll be asked to link to your financial institution, which can be completed in minutes. New funds show up in just a couple of days, at which point your account is up and running.
Users transferring IRAs and other accounts from other brokers will usually see the accounts appear in 2-3 weeks.
There’s no minimum deposit to begin, but make sure to take advantage of free service for the initial deposit amounts specified above.
Once your account is humming along, Betterment will send you a series of helpful emails, detailing Betterment features and making sure you’re getting the most out of the service.
Betterment understands how to make this helpful, not annoying, a delicate balance Vanguard hasn’t figured out, IMHO.
You’ve just read lots of words about Betterment investing. By now, you know we’re enthusiastic about Betterment, and that we have every reason to be.
To sum up, Betterment is affordable and effective for use in financial planning and the creation of investment strategies.
Investors and personal finance enthusiasts can appreciate just how easy Betterment makes it.
It’s so easy to use and so effective at growing wealth that new investors are signing up by the thousands, especially as there is no minimum investment.
We love how responsive Betterment is to user feedback, how quick they respond to our emails, and how many useful features and improvements they’ve added in a short time.
We only expect Betterment to get better. Even now, they’re a true leader in the robo-advisor and modern investment landscape.
Click for Betterment Pricing and Details.
Related Investing Product Reviews:
Tax-Loss Harvesting & Rebalancing